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When your Corportion tells you it Can’t Afford A Raise for your Crummy Retail Job, Show them This:

In retail industry after retail industry, labor productivity (output per hour of labor) has increased at a rate outpacing increases in workers’ compensation for their labor, measured per unit of output.

Productivity in the Retail Sector vs. Labor Costs per Unit Output, % Change from 2007-2014. Source: Bureau of Labor Statistics

Retailers in these industries are getting more profit out of their workers for every hour worked, and it’s pocketing the difference, sometimes while paying workers far less.  The line that these U.S. retail industries can’t afford to give their workers a raise? It’s got a hook at the end of it.

Source: U.S. Bureau of Labor Statistics, Tables on Labor Productivity and Costs, Feb. 20 2016

5 thoughts on “When your Corportion tells you it Can’t Afford A Raise for your Crummy Retail Job, Show them This:”

  1. Jon sanders says:

    The flip side of retail industry personnel costs is the relationship of profitability to stock price. All things being equal, the lower the personnel costs the higher a company’s net profit, and normally the higher the per-share stock price. A company owes it to its stockholders to maximize its investor returns , thus also insuring future viability. Normally, profits do not go directly into the “pockets” of the owners/stockholders, but are retained (less dividends) to make the company financially stronger. Publically-traded retailers’ stocks are typically widely held and constitute a significant element of the U.S.’s 401k and retirement accounts, the performance of which is playing a major role in the ability of retirees to finance their retirement years. Pension plans are going away, replaced by retirement accounts, and such accounts are heavily dependent on market performance. I am quite familiar with positions favoring mandated minimum-wage increases, which are fully supportable, but wanted to give the readership an alternative view without appearing to be a Big Business troll.

  2. Dave says:

    It’s a great graph, Jim, and you are right to say retail jobs are crummy. I agree most of them are, but I too wondered about the “pocketing the money” angle. Can you supply a graphic proving that the retailer’s pockets are where the money goes?

    1. Jon sanders says:

      “Pocketing the money” implies that company owners are withdrawing all the profits a company makes, thus stripping the business of its ability to grow and prosper. Though I have seen this technique used by company management, it is not the usual practice for organization’s that are interested in long-term success. About 85% of the number of businesses in America are designated as “small business” and numerically employ the majority of -Aamerican workers. For the most part small business management is mainly concerned with the long-term financial viability of the enterprise, and often recognizes that major elements in company longetivity are making a profit, keeping leverage under control, maintaining and/or increasing sales, and reducing turnover by keeping the workforce reasonably content. Anecdotal exceptions are easy to come by, but in general companies that do not pay attention to these factors usually end up weaker and/or fail (eliminating the entire workforce).

      1. Dave says:

        Jon Sanders. My wife and I ran a book store for eleven years till we let Amazon have it. I remember heading over to the bank each 15th of the month with the income taxes for our little (but happily successful) Subchapter S corportation. Republican “tax cuts for the rich”mostly went to small business, about 75 to 80%. What I did with the 40% reduction in our monthly corporate taxes was to hire more help and pay them well above minimum wage. They had benefits through family or other jobs and worked with us just for the extra money. When we paid them, they went shopping. You know, spreading the wealth. They got what they wanted from us, we got what we wanted from them.

        You’ll never get this across to most people. They are certain that we pocketed it. Jim knows I think he is usually fair even to those he opposes politically in many of his posts but when it comes to my anecdotal evidence he’s just not a believer. It’s textbook sound economics but my story and probably hundreds of thousands of similar stories don’t fit the political narrative for the necessity to “tax the rich.”

        Bernie wants to heavily tax income 250k and up to pay for his schemes, but that’s around what my little S Corporation made before paying out for expenses. Though we had loads of fun, the net was a modest living for us (our car and truck were some of the oldest in our small town) but Bernie and his supporters don’t distinguish between Big Acme Corp and Little Book Corp. To many we were just doing evil things with our evil profits.

        1. Jon sanders says:

          Amen. I am a retired bank examiner who spent most of his working life analyzing and passing judgement on small businesses like yours. I am also a member of SCORE (volunteer adjunct of the SBA) and your experience and attitude toward small business is one of the things that makes this country great. Most owners of small businesses have most of their net worth wrapped up in their enterprise and have the perfect right to make a return on their investment (ROI) significantly higher than what that net worth could have been earning invested passively. The risk-vs-reward factor is off the charts. Treating employees as major contributors to a business’s success is paramount. Virtually all of the successful small businesses I reviewed had this attitude in common. Such businesses never had problems getting bank loans.

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